business chapter 25

Credit is based on the creditor’s confidence that the debtor can and will

repay the debt.

• True

• False

The federal government uses credit to pay for many of the services and

programs it provides to its citizens.

• True

• False

Credit can diminish the growth of an economy. Delaying payment means

there is less money for a business to buy more inventory or invest in new supplies

and equipment.

• True

• False

Late or missed payments lower a borrower’s credit rating.

• True

• False

Consumer finance companies specialize in loans to people who have

excellent credit ratings and, therefore, offer lower interest rates.

• True

• False

A person who borrows money is called.

• A creditor

• A debtor

• A lender

• economically disadvantaged.

The fee charged for borrowing money is called.

• borrowing cost
• fee
• loan charge
• interest

Which statement is most true?

• Everyone pays the same interest rates for credit on the same product.

• The longer you borrow money, the more interest you pay.

• Everyone is entitled to credit.

• The more money you borrow, the less interest you pay.

A “rate surfer” is one who

• Switches credit cards based on interest rates.

• Avoids credit cards altogether
• Keeps the same credit card for years without changing
• Always pays off credit card balances in full

The measure of a person’s ability and willingness to pay debts on time is

called a

• Payment reliability
• Credit no

• Creditability
• Credit rating